Unforgivable Mistake

Sometimes you get so involved in one kind of analysis that you just forget others, committing one of the most common mistakes: lack of attention. This is particularly bad when the set of tools you use is limited to a couple, and very efficient. Last week I was so involved with my date projections that I overlooked other aspects of my analysis, to the point that one reader – bullnbear87 – had to call my attention to it. Yesterday, my post was all about the absence of any sign of a nearing – or even behind – bottom. And today we saw the market tanking to unbelievable levels. First, I’m going to show where we are, and this is historical. Then I’m going to show my big bold unforgivable mistake. First, VIX:

Notice that this is a 10 year monthly chart. Today we peaked above 2001’s high, to levels unseen since 1998. Notice also that today’s close is the highest in the chart.

SPY seems to be oversold, reaching a level not seen since 2000. Are we up for a bounce? Maybe. Check this out:

Today SPX just stormed through the bottom level of the consolidation zone marked with a red rectangle and kissed the top of the next important consolidation zone marked in green. Notice however that today’s close is exactly the bottom of the red rectangle. More or less two weeks ago I talked about a target of SPX 920. At that time SPX was trading around 1200, so 920 was like science-fiction. Today we are not very far from it. However, I would still look for a better entry point. Financials are also going where they are supposed to go (not to hell, but not very far from it):

I mean, they are going below July’s low. As weird as it can be, there’s a huge divergence on the MACD and DPO. But, as many here already know, I don’t trade based on divergences. What I see instead, is more room to fall.

Now, here is the big bold unforgivable mistake I made on Friday.

MACD and Stochastics down, and Friday’s rally just kissed DMA 3×3. That was one hell of a missed entry point I lost! Well, not exactly lack of attention: I was going to Rio with my parents to introduce them to the family of my fiancee. Stupid that I missed it, but not so much.

The lesson: you have a set of tools, pay attention to all of them. The more attention you pay to them, the more opportunities you’re going to find. Opportunities that allow you to get in a trade with confidence and make money. The big mistake I made was actually to give more priority to one of the aspects of my analysis and overlook others.

On the other hand, a missed opportunity is a missed opportunity: never look back and cry over it. Look ahead and find another one. And don’t miss it.